First, a primer: Inflation shrinks your purchasing power, so you need more money to buy the same goods and services
Few economists predict we’ll return to the double-digit price increases of the late 1970s and early 1980s. But knowing some of the ways consumers coped back then — and how things are different now — can help you formulate a plan to deal with rising prices.
When inflation averages less than 2% , as it did from 2010 to 2020, it would take more than 35 years for prices to double. When inflation averages 5%, which was the annualized rate reported in May, prices would double in less than 15 years. That is a huge deal if you live on a fixed income or are trying to calculate how much you’ll need in retirement.
“People forget about the potential impact of inflation, since we really haven’t seen very much,” says Penelope Wang, deputy money editor for Consumer Reports.
Here are some strategies that may prove helpful.
With persistent inflation, delaying a purchase could be costly, since the price is likely to rise in the future. With today’s inflation, that’s less clear.
Jerome Powell, chairman of the Federal Reserve, says pandemic-related shortages and bottlenecks are behind recent price spikes. He predicts inflation will ease as the nation’s economy continues to reopen.
That certainly seems to be the case for lumber prices. The cost of lumber increased more than 300% from April 2020 to May 2021, adding http://yourloansllc.com/title-loans-wy $36,000 to the cost of the average house, according to the National Association of Home Builders. But lumber prices have retreated substantially from those peaks as pandemic-related shortages ease. If you rushed into a remodeling project or otherwise locked in the high prices, you’re likely regretting it now.
On the other hand, you may want to stock up on meat, poultry, eggs, dairy products and fresh fruits and vegetables when those go on sale, Wang says.Read More